Fifteen Eighty Four

Our economy doesn’t work for us and it hasn’t for a long time. Not only is it prone to periodic crises and breakdowns, but it is failing us in terms of addressing longer-term issues such as climate, elder care, and a living wage. This cannot be blamed solely on exogenous shocks or external social and political phenomena. We have core problems built into the economy and there is no reason to expect any relief until we undertake the necessary reforms.

That’s the bad news. The good news is that the problematic design features are identifiable and solutions well within reach. Our biggest obstacle–which unfortunately is somewhat formidable at this time–is philosophical. Policy makers and the general public often have a difficult time conceptualizing the process by which we can extricate ourselves. To a large extent, this is the fault of the economics discipline, which has (particularly in the area of macroeconomics and business cycles) become increasingly irrelevant over the past half decade. In their view, the system is sound, efficient, and benevolent. It is not.

These are the dominant themes in my new volume, US Business Cycles 1954-2020: Sources, Symptoms, and Solutions. After briefly arguing that current mainstream economic research has fatally misdiagnosed the source of our problems, an alternate explanation of output, employment, inflation, and the financial sector is offered. It is based heavily on the writings of John Maynard Keynes, the economist whose work best explained the operation of our macroeconomy but who was largely ignored (what became known as “Keynesian” economics is a far cry from Keynes’ original analysis). The insights of Paul Davidson, Michal Kalecki, Hyman Minsky, and Wesley Clair Mitchell–also almost completely overlooked by orthodoxy–are incorporated as well.

Once developed, this framework is used in the titular chapter to present a narrative account of US business cycles from 1954-2020. The key take away is the fact that one cannot possibly explain US macroeconomic fluctuations and long-term trends without recognizing the systemic problems that exist, the two core ones being:

•           physical investment spending, which drives economic expansions, inevitably declines as firms reach targeted capacity, leading to crisis and recession;

•           our ability to produce sufficient output to meet consumer demand with fewer and fewer workers locks us into a downward spiral of unemployment, falling wages and incomes, and debt.

But there is a way out: a government-sponsored job program. This would not only provide employment to those unable to find paid positions in the private sector–thus allowing them to purchase the goods and services we already have the capacity to produce–but at the same time let them gain experience and develop new skill sets. In addition, their efforts could be focused on the social problems ignored by the private sector including climate, income maldistribution, and the care economy. The volume redefines what is and isn’t possible and includes an outline of a sample job program. It shows how eminently affordable one is. Indeed, if we are to make the economy work for us again, we cannot afford NOT to have one.